What Decisions Should You Make Before Bankruptcy?

Bankruptcy can save your home, stop creditor harassment, and give you protection against the worst possible financial situations. Many downplay the reasons for filing bankruptcy. Yes, bankruptcy is not always the best option, but it's definitely better than many of the alternatives.

Is Bankruptcy the Best Option?
This is a decision you do not have to make immediately. It's best to do it with legal and financial experts, along with your family.

The reasons for filing are many. You may have just got a $50,000 medical bill, or lost a job of ten years, or face foreclosure because your family income was cut in half. This is where bankruptcy can truly be a life changer. It's designed to help those with impossible debts. And what's an impossible debt? You have no means of paying it back, no way to gain any ground by saving for 3-5 years. It's very common to have a bankruptcy where you have no other feasible options.

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File Chapter 7 or Chapter 13?
Filing Chapter 7 is not always best. Sometimes a Chapter 13 bankruptcy is much more in your interests. Or it may be the opposite, that Chapter 7 will save you from a financial nightmare.

You don't always choose bankruptcy, but you often can choose how to use it on your own terms. This is a decision to make with some legal guidance. Filing Chapter 7 discharges the majority of your debts, but protects you less from foreclosure and repossession. Chapter 13 bankruptcy is more about protection, not saving.

Hire a Lawyer?
Should you hire a lawyer or forgo legal counsel? Sometimes it's out of your hands: you just can't afford a lawyer. It may be a tough decision to make. Whatever you can do to pay seemingly large legal fees is worth it. These legal fees sometimes are in fact too much; that makes shopping around smart. However, paying a lawyer $2,000 to save you $50,000 doesn't sound too bad.

What Will You Lose?
You stand to lose some assets if you do not file, but you have to pay that lawyer fee. You might lose your home, but filing bankruptcy doesn't seem right. Quite often, you lose more by avoiding bankruptcy than making the decision and filing. If you file Chapter 7 bankruptcy, you may have to part with some nonexempt assets. If you file Chapter 13, you may have to pay the majority if not all of your debts. So this may cost some assets and money. If you don't file, many stand to lose everything. Sometimes the best choice is to file.

What Will You Gain?
You get a second chance with bankruptcy. Sure, you can choose a debt consolidation company, miss a payment, and have no legal recourse. You could do nothing and wait for the bill collectors to take everything. These are decisions to be made. Sometimes simply sitting down with a lawyer in a free consultation offers you the best picture of your options, and how to make decisions.

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